Gold price today surged by Rs 1,310 per 10 gram here, the highest in two years, to Rs 31,010 on strong demand from stockists ahead of festive season, after government increased import duty on the metal to 10 per cent.

A sharp fall in Sensex and rupee against dollar and strong global cues also contributed to the upsurge in gold price, which posted the biggest single-day gain after August 19, 2011. Interestingly, the metal had shot up by Rs 1,310 on August 19, 2011 as well.

Gold has regained Rs 31,000 level after a gap of six months. An all-time high was Rs 32,975 per 10 gram on November 27, 2012, in Delhi bullion market.

Silver followed suit and spurted by Rs 3,270 to Rs 49,320 per kg, its biggest single day gain this year on rising demand from industrial units and coin makers.

Bullion traders attributed the sharp jump in gold prices to fear of tight supply following government's decision to hike import duty of silver and gold to narrow current account deficit.

The buying sentiment got bolstered as rupee hit record low of 62 against the US currency, making the dollar -denominated metal costlier.

"Gold is back in demand as falling rupee and melting equities leaving no place for investor to park their funds," All India Sarafa Bazar vice president Surender Jain said.

He said a firming trend in overseas markets also supporting the bullion where as market hardly witness any physical buying.

Gold in overseas markets climbed to two-month high on strong buying from China and prospects for less US monetary stimulus. The metal rose by 0.50 per cent to 1,372.97 dollar an ounce in Singapore.

On the domestic front, gold of 99.9 and 99.5 per cent purity spurted by Rs 1310 each to Rs 31,010 and Rs 30,810 per ten grams respectively. Sovereign followed suit and climbed by Rs 200 to Rs 24,700 per piece of eight gram.

Silver ready sky-rocketed by Rs 3270 to Rs 49,320 per kg and weekly-based delivery by the same margin to Rs 49,220 per kg. Silver coins flared up by Rs 2000 to Rs 86,000 for buying and Rs 87,000 for selling of 100 pieces.